Canada‘s Jeff Watts’ voice when you use “”stripped-down”” in the same sentence as his company’s small and medium-sized business (SMB) offerings. “”We’re finding that, in the SMB space, people are looking to technology to enable their businesses, just like large enterprises,”” he says. “”We classify them as SMBs, but they don’t see themselves as that.””

They see themselves as growing companies that want the same power and performance as their Fortune 1000 brethren, says John Bodolai, PeopleSoft Canada‘s regional director. “”They still have very complex requirements. Bad IT decisions do have an impact on their businesses.””

As a result, the choice of enterprise applications can be daunting for small businesses. They have to balance their current needs with the possibility — indeed the expectation — of growth. For a company like Admore Personnel Inc., which has experienced a “”200 to 300 per cent revenue growth in the last year,”” according to CEO Hylton Maizels, the danger was software lock-in. The Toronto-based IT staffing firm’s IT evolution progressed from Excel spreadsheets to “”best-of-breed”” industry-specific applications. The problem was that this set of single-solution vendors failed to keep up with Admore’s growth.

“”The main application that we were using was essentially the same generic product we were using in the mid-1990s,”” Maizels says. “”It hasn’t grown. But it’s evident that Admore is growing and we wanted to take the business and stay on the cutting edge.””

That’s what made SAP’s mySAP All-in-One attractive to Admore. An intregrated, template-driven version of the ERP vendor’s main product suite, All-in-One — like PeopleSoft’s EnterpriseOne — promises a choice of module options and rapid deployment. These offerings reflect the growing realization by the big vendors that, though SMBs have some things in common with traditional ERP customers, they have specific needs and expectations.

The current enterprise application suites for SMBs are not stripped-down solutions so much as a kind of ERP buffet, designed to be more digestible to smaller enterprises. “”SMBs don’t want to be shoved a large-scale enterprise solution and be forced to eat it,”” says IDC Canada analyst Michael Hyjek.

Even if the main focus of SMB IT spending is on upgrades and maintenance, IDC sees the Canadian market growing from about $9.2 billion to $10 billion in 2008.

However, the big vendors don’t just see the small- and mid-market as a growth opportunity. SMBs are tightly focused enterprises that could very well grow into large-enterprise ERP customers. In an era of flat IT budgets, moreover, vendors like SAP can promise comprehensive IT solutions designed to ease growth, but at a modest price tag. They might be selling huge application suites, but they’re huge suites that — many SMBs hope — will come in handy when they graduate to the big leagues.

“”SAP is a massive product,”” Maizels says. “”There is a whole slew of components that we’ll never use or see, but we only turn on the components that we use. It’s like when you turn on Microsoft Office — not everyone’s going to use Excel or PowerPoint right away.””

Moreover, small manufacturers, particularly, don’t live in a vacuum. Big Tier 1 companies in the automotive and consumer products industries are placing increasingly complex demands across their supply chains. How, for example, can a small manufacturer comply with Wal-Mart’s radio frequency identification mandate unless it has fully understood and automated its own business processes?

“”Big companies are driving what SMBs consume,”” observes Hyjek. “”Initiatives like the Wal-Mart mandate are being driven down the supply chain.””

These downstream developments leave many SMBs in a quandary, but as Hyjek notes, most small businesses buy on pain. “”They buy exactly the solutions they need, when they need them,”” he says. What they need right now might not be exactly what they need a year from now, and it probably won’t provide the kind of smooth integration demanded by supply chain processes.

“”There are a lot of good point solutions out there, but business owners want end-to-end visibility of their business processes,”” Watts says. “”And those vertical solutions don’t offer that without integration, and it’s integration that cripples a company. SMBs often hit a wall because they’ve bought a series of point products and they want to grow, but their technology won’t let them.””

Bodolai agrees. “”What the mid-sized business really wants is best-of-breed functionality,”” he says. “”But they yearn for the suite so they won’t have to go through the headaches of integration. In this market, each component should stand on its own as an application, but it has to be able to integrate.””